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STatiana [176]
3 years ago
11

Suppose you deposit ​$1 comma 000 cash into your checking account. By how much will checking deposits in the banking system incr

ease as a result when the required reserve ratio is 0.5​0?
Business
1 answer:
Scilla [17]3 years ago
4 0

Answer:

change in the Money supply = $2000

Explanation:

given data

deposit = ​$1,000

reserve ratio = 0.5​0

to find out

how much will checking deposits in the banking system increase as a result

solution

we get here change in the Money supply that is express as

change in the Money supply = Change in the Monetary base × Money multiplier     ............................1

here

Money multiplier =  \frac{1}{reserve\ ratio}     ..................2

Money multiplier =  \frac{1}{0.5}    

Money multiplier = 2

put value in equation 1

change in the Money supply = 1000 × 2

change in the Money supply = $2000

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